Budget Surplus Is Projected By Analysts In New York

By SAM HOWE VERHOVEK,

Published: October 27, 1992

ALBANY, Oct. 26—
New York State's leaders, who for the last four years faced massive midyear budget deficits that spurred bitter political fights and painful spending cuts, announced today that they were facing something all but forgotten in the Capitol: a budget surplus.

The surplus, while negligible in size, nonetheless indicates that the state's $30.9 billion budget is in balance. That alone suggests a significant turnaround not only in the state government's financial condition, but also in the way it approaches budgeting.

Last year at this time, state officials said there was a $689 million deficit. The announcement was followed by months of budget battles that Gov. Mario M. Cuomo said kept him on the sidelines of the Presidential campaign and that caused a damaging cut in the state's credit rating. Cautious Revenue Forecasts

Today's report, from the state Division of the Budget, could be the first step in a lengthy process aimed at restoring the state's credit rating, which sank earlier this year to the lowest of any state in the nation. Massachusetts, which previously held that dubious distinction but was forced to grapple with its budget problems earlier than New York, got such a boost this summer.

The small surplus of $21 million was tied not so much to any fundamental recovery in New York's economy, but to cautious revenue forecasts built into last spring's budget agreement and an economy that has not grown significantly worse since then, budget analysts said.

Today's announcement from the budget division, which is overseen by Governor Cuomo, came barely a week before all 211 state legislative seats are up for election. But the budget report was required by law to be made before this Friday, which marks the official midpoint of the state fiscal year.

Mr. Cuomo is not on the ballot, and if anything, the news would appear to be most beneficial to his Republican adversaries, who are facing a tough battle in their bid to maintain control of the state Senate. The Democrats have an all but unshakable hold on the Assembly.

Last year, at the height of the budget battles, Mr. Cuomo accused the Republicans of driving the state to the brink of financial ruin, and pledged that he would remind the voters of their alleged transgressions this fall. But Mr. Cuomo was mostly smiles when he appeared with the Republican Senate leader, Ralph J. Marino, this afternoon at a bill-signing ceremony. 'Going to Get Killed'

The Governor, Mr. Marino and Democratic lawmakers ratified a "memorandum of understanding" for how they planned to spend the money from the $800 million economic-development bond act, if voters give their approval to it next Tuesday.

Last December, after the State Senate refused to go along with the Governor's plan for a multiyear solution to the state's budget ills, a furious Mr. Cuomo said of Mr. Marino and his Republican colleagues: "They're going to get killed when they are revealed to the world. They are going to get badly burned." Mr. Marino himself is now facing a bruising re-election battle.

But today, asked whether he wished to reiterate such comments, Mr. Cuomo simply said voters should "remember what the Republicans did, they should remember what the Democrats did.

"They should punish the bad guys and support the good guys," he said. Asked just who the "bad guys" were, the Governor waved the question off. Warning: It's an Estimate

The surplus revealed today is so relatively tiny that there is no chance that the Governor and legislative leaders will return here to fight over how to divvy it up, just as they fought in past years over how to close the deficit. They will, however, return to fight: a special session is expected to be held in December to grapple with a separate, contentious budget issue of how to finance various transportation programs, including a capital plan for the Metropolitan Transportation Authority.

In fact, budget analysts warned today that the figure was only an estimate of where the state would wind up at the end of the fiscal year next March, and that the budget could fall out of balance.

And Mr. Cuomo, speaking to reporters at the Capitol, said that it would be "very tough" to put together next year's budget, due April 1.

"We're $21 million ahead and believe me, that's glorious considering where we've been in recent years," he said. "But next year is going to be very, very difficult."

In recent years, when the midyear deficits have ranged to as high as $1 billion, the Governor and the legislative leaders have had to eliminate thousands of state jobs, cut aid that had been previously pledged to local governments and school districts and pare social services like Medicaid.

At times they also fought, as they did last year, to a standoff over where to make additional cuts and wound up borrowing money to keep the budget legally balanced. That only worsened the problems in the next fiscal year.

This time around, the projected surplus appears to eliminate the prospect of such cuts or of any mid-year tax increases for New Yorkers. But an analyst at the Citizens Budget Commission, one of the best-known private groups that monitors the state's fiscal practices, warned that today's announcement did not guarantee that the surplus would be there at the end of the year.

"It's heartening to see that the receipts seem to be on target, but of course, the revenues could change, the economic picture could change," said the analyst, Cynthia Green. She also said that state leaders would have to avoid any temptation to increase spending before the fiscal year ends March 31. "What's critical is to stick to this plan not just for six months, but for the full 12 months," she said.

There was no expectation here that today's word would lead to any immediate upgrade of the state's credit rating, which could lower the costs of borrowing money and save the state taxpayers millions of dollars.

George W. Leung, the vice president and managing director for state debt ratings at Moody's Investors Service, said it was clearly "good news" that, for the first time in five years, there appeared to be no mid-year deficit.

But, he said, several additional steps toward "structural reform," including cuts that would recur in future years, would likely be necessary before a credit upgrading would be addressed. Even Mr. Cuomo said he did not expect any re-evaluation from the raters, at the earliest, until after the state's 1993-94 budget was put together next spring.

Graph: "The State Budget: Surplus and Deficit History" -- New York State budget officials projected yesterday that the state, now halfway through its current fiscal year, will have a small surplus at the end ot the fiscal year next March. Here is a comparison of similar projections from recent years: '87-'88: $24 million '88-'89: -$994 million '89-'90: -$277 million '90-'91: -$824 million '91-'92: -$689 million '92-'93: $21 million (Source: State Division of the Budget) (pg. B5)